The white tissue paper that just moments ago was carefully cradling all manner of precious objects is lying crumpled on the concrete floor. Louiseann Zahra is tearing at more white packages, pulling long lines of threaded chandelier pieces, bronze birds, miniature skeletons and brass human hearts out of their wrapping.

Intrigued, as if they are unexpected presents, she stands to dangle these lengths of strung treasure from her outstretched arm. There is clothing, too, two silk nightdresses that she unwraps and holds up to the light.

That Zahra has sewn shiny black sequins in the shape of an adult skeleton on one and stitched the shape of a baby skeleton on another, strangely enhances the appeal of these second-hand buys. Though Zahra says she could never actually wear the garments. "They're your own trauma, aren't they? They potentially speak of the human condition - the frailty of our bodies, our love and desire - and the continuity of family."

They are also her own artworks, which this week went on show at Craft Victoria in an exhibition she has called the dead are never lonely. The idea that the dead are never really alone was inspired by the exuberant Day of the Dead festivities in Mexico.

Zahra spent five weeks in Mexico last year, specifically to experience the week-long festival, when the deceased are honoured with customs that are more celebratory than sombre. There are lively grave-site reunions, music, fireworks and lots of colourful trinkets and confectionery goodies - skulls, skeletons, coffins, body parts.

Zahra found herself fascinated by the way these ritual objects are so intricately made, only to be somehow consumed during the festival. Though ideas surrounding the ephemeral are far from foreign to Zahra's own approach to art. Her work has long featured discarded objects, embroidered and monogrammed textiles, say, that were worn and slept in and then no longer wanted.

For her latest show, she gains a similar effect from old wedding rings. She bought the predominantly gold bands from local pawn-brokers and then suspended them from the end of her threads of dried marigolds, feathers, cast Mexican trinkets and Mexican chandelier pieces.

"When you see the rings in a pawn broker, there is normally a tray of them and it is like a communal loss," she says. "They have a history, but the thing is not all that history is bad. There was a moment of great love, great hope and devotion. I am interested in the way meaning is still present in what has been discarded."

The idea of putting the works on string and wire evolved from the Mexican trip, during which she saw lots of items quickly threaded. She likes the rawness of the technique and has done away with both framing and enclosing her works altogether for the Craft Victoria show.

In the same vein, she prefers her embroidered nightdresses inside-out with the working side of her stitches exposed ("it becomes a little cross-hatch drawing") to the "glitzy" side, when the silk clothes are the right way out.

For the dead are never lonely, the nightdresses are lying (inside out, with just a glimpse of the sequins inside one of the garments) on the floor, along with about 30 cast bronze feathers. Projected on to one wall is a Super-8 film of two dancing skeletons (on which she collaborated with photographer and filmmaker Justin Bernhaut), while the threaded works are suspended from other walls. There is a deliberate absence of preciousness in the display.

"This has been said heaps of times, but the art gallery's the new church," Zahra says. "It's a secular space for considering questions of philosophy, it's a place where you can contemplate the object but sometimes the object shouldn't be kind of blatantly up on the wall demanding something, maybe it should be gentler, something that's a bit more vulnerable."

So vulnerable, in fact, that Zahra wonders whether she might have to remake some of the work if the exhibition tours interstate, especially the pieces featuring dried marigolds, which can fall apart even as she threads them.

Though, after the smelly patina she applies to her cast bronze objects, working with the flowers is pure pleasure. The Mexicans scatter the petals through cemeteries all the way to their houses to guide loved ones' souls home. Zahra's locally procured flowers were originally destined for the naturalist health-care industry.

"A lot of art-making is so kind of hideous and boring, you know," she says. "It smells bad, it makes you feel unwell, there's dust everywhere. After all the stinking stuff, it's quite nice to thread flowers." Before the flowers, Zahra has had tiny pieces of metal go up her nose and now always feels compelled to wear a carbon-cartridge face mask when heating up the concoction that turns her bronze trinkets a soft shade of platinum. And then, there's the icky occurrence with duck blood not so long ago, after which she has been "strictly vegetarian".

She collected the blood in ice cream containers from a butcher in Footscray and, to her alarm, when she accidentally splashed it on to her arm, found it was still warm. "I kept working because I thought it was even worse not to use it," she says. "I wanted that sense of ritual, the sacrifice and stuff. But it should have been my own blood . . . nobody would take it." She says she won't use blood again, though reflects that the feathers in the current show have "quite awful connotations, too, when you look at them".

There are black feathers, orange petals, metal shavings, all manner of stuff lying around Zahra's studio - a large ground-floor garage below her warehouse apartment in Footscray. She likes the flexibility of having her studio at home, especially given the time constraints imposed by her part-time position as the curator and manager of RMIT Project Space and the doctorate she is doing in fine art at Monash University.

While she sometimes "ducks down" to have a quick look at works in progress, she says she rarely takes her work out of the studio. Even the embroidered or threaded pieces, which you might think would be rather nice to take upstairs to get on with, she only makes in her studio under a bright light.

She has numerous pieces on the go at once because, she says, much of the work is so repetitive that it is better to break it up. "I can't find another way of doing it," she says. "The idea of working on a piece, finishing that, working on another piece, finishing that, just doesn't resonate with me.

"I think I probably broaden and strengthen the relationship between the pieces because of this working method, because they are continually informed by each other. I normally finish a few days before the show opens and then the show isn't actually finished until I have finished the installation because then it's made for the first time and that's a massive leap of faith."

Zahra says she tries not to mediate the work too much and likes to make things on a whim. Nevertheless, she had a real yearning to visit Mexico for the Day of the Dead and says the work has shifted as a result.

While she says that, personally ("touch wood"), she has not been touched by death, she is plainly touched by it in the abstract, all the time. She talks about visiting the catacombs in Paris ("very weird stuff") and family plots in European cemeteries where bodies are stacked together under the earth.

She sounds intrigued rather than maudlin and, similarly, the reflective mood of some of the works in the dead are never lonely is cut by a flamboyant sound-piece she recorded in Mexico (and later collaborated upon with musician Roy Taylor). This theatrical cacophony of music, laughter and conversation plays in loop throughout the show.

Zahra describes the exhibition as "festive, with a little bit of sadness". "Both of those things co-exist in every moment of your life, and that's the tone I want to set."

the dead are never lonely is at Craft Victoria (31 Flinders Lane, City, phone 9650 7775) from October 21 to November 29.